Many people have bad credit these days. Since cheap and easy credit has become so common, more and more people have bad credit. This has led to the subprime mortgage phenomenon.
But just because you have bad credit does not mean you will be able to get a mortgage for people with bad credit.
The reason for this is that the lender has to figure out if the applicant is a risk before deciding whether to approve the application or not. Some applications are turned down because the risk is too high.
In other situations, the risk is not too high, so the lending company just raises the interest rate. There are many things that a bank or subprime lender could do to approve a mortgage loan application even if the borrower has bad credit.
Find out how much money you can borrow. This is the first step toward buying your home. In the UK, this is based on your income, which is usually three times your annual salary before taxes and national insurance are taken out. This is your "real" income, not the amount on your paycheck.
Some lenders will give you as much as six times your income! They are not being helpful. A mortgage is a big loan that has to be paid back. If you don't pay it back and then go bankrupt, you might not be able to get any kind of credit again.
Before taking the plunge, you should do everything you can to improve your credit score. Do what you can to improve your credit score before you fill out any applications. Pay off old loans, and once you've done that, ask your creditors to take bad things off your credit report.
If you need new, good credit but can't get a regular credit card, you might want to get a secure credit card, which is issued in exchange for a guarantee or collateral. Most of the time, this is a deposit in the bank that is giving you the loan. You can borrow up to this amount.
Use a credit card from a department store, charge a few things on it, and pay them off quickly. The goal is to have good things show up on your credit report. Even though this sounds a bit desperate, it is the best way to show a lender that you have good credit.
Make sure you pay all your bills on time or early. Never pay them after the due date. A good credit history would help you a lot if you want to get a mortgage.
When applying for a mortgage, the best thing for people to do is to talk to their broker about the different kinds and the options they qualify for. This way, you'll have a better idea of what's out there and can make a choice based on that information.
But keep in mind that some mortgage lenders pay some brokers a commission for sending customers their way. It's best to use an independent broker to find the best mortgage for your situation on the market.
Before you apply for a mortgage, try to beg or borrow money from friends and family if you are sure you can pay them back quickly and keep them loving you. Revise your plan. How much money do you really need to make your dream come true?
If you get a mortgage from a subprime lender and don't like the interest rate, you can always remortgage again in the future. Be sure to keep making payments on time and work to improve your credit score so you can remortgage again when you need to.
